Debt Threatens UK Businesses
November 2006
Research released this month by Close Credit Management shows that the nation’s small businesses are still threatened by rising debt levels.
Figures released by Close Credit Management tally with research from other UK-wide agencies, indicating that Small and Medium Enterprises (SMEs) have little provision to combat rising debt, costing businesses an average of £14,000 each year.
The Sheffield based credit management specialist claims that SMEs are leaving it too late before taking measures to collect their debts through third party expertise.
Nick Shepherd, Financial Director at Close Credit Management, said: “We are seeing an increase in the number of SMEs taking court action to recover debt, which indicates that the debts at that stage, are either long-standing, or companies are so desperate to recover their money that they are taking severe measures earlier on in the collection cycle.
“Many companies are unaware that services such as our own online service – Debt Recovery Online, are specifically targeted at small businesses and people with lower volume debts than larger organisations.”
Close Credit Management’s research is supported by findings of the Department of Trade and Industry (DTI) National Statistics division, which identified that SMEs account for more than half of the employment in the UK.
Although the number of SMEs in the UK rose during the period 2004/2005 by almost one and a half per-cent, 2006 has seen more overall business failures in the first nine months of the year than in the same period in 2005.
Nick said: “Many SMEs simply do not have the basic infrastructure in place to manage debt and one of the most common problems is that companies do not stipulate repayment dates when sending out invoices.
“This trend towards expanding debt within smaller enterprises can have significant knock-on effects to the UK economy, with SMEs providing over half of the UK’s annual turnover and employment.
“What we urge, is for the region’s businesses to concentrate on short-term debt recovery and to refer the remainder on to a third party company, which can be comfortably factored into any business plan.”
Suzanne Barton, Close Credit Management’s Statistician, said: “Our research has drawn a worrying picture, with many sectors finding themselves in difficulty.
We have found that the UKs total interest lost through SMEs in the private sector with debt exceeding a 30 day invoice date is £2.7 billion. Certain sectors, such as building materials, have seen a 157 per cent increase in SME closures through insolvency.”
Nick added: “With services like Debt Recovery Online, we can offer ways to reverse this trend. Clients can take advantage of services ranging from standard debt collection to legal appraisals, and free company searches and tracing, all offered at a cost effective fixed price. Debts that aren’t collected efficiently are a costly burden to bear for any company, and one that is no longer necessary.”